Problems in the credit markets coupled with a sharp drop in equity markets have affected many hedge fund returns. As many managers in the loosely regulated $1.75 trillion industry suffer more losses in August, speculation mounts that more funds could be on the brink of shutting down.
Following is a list of firms whose hedge funds have recently posted losses or have been shut down entirely, their location, and a description of their troubles:
— Basis Capital (Australia) – The firm’s Basis Yield Alpha Fund files for bankruptcy protection in the United States on Aug. 29 amid mounting losses from U.S. subprime mortgage assets. Earlier the group suspended redemptions on two of its funds and appointed U.S.-based Blackstone Group to help prevent a fire sale of assets. In mid-August the group said that one of its portfolios had lost more than 80 percent.
— Bear Stearns Cos (United States) – Two Bear Stearns funds which invest in collateralized debt obligations — bonds comprising repackaged mortgages — by mid-June are trying to sell about $4 billion in bonds to raise cash for redemptions. Major investment banks seize assets or unwind positions. Bear eventually bails out one of the funds and lets the other one fail. In late July, Bear Stearns halts redemptions at a third hedge fund.
— Absolute Capital (Australia) – Half-owned by Dutch bank ABN AMRO. Temporarily closes two funds in late July with a combined A$200 million in assets amid problems with collateralized debt obligations.
— Macquarie Bank (Australia) – The bank warns in early August that retail investors in two of its debt funds face losses of up to 25 percent.
— Oddo Asset Management (France) – The French financial services company in late July closes its Oddo Cash Titrisation, Oddo Cash Arbitrages and Oddo Court Terme Dynamique funds, which manage total assets of around 1 billion euros.
— Sowood Capital Management (United States) – The hedge fund which managed money for Harvard University tells investors on July 30 that it will wind down after suffering losses of more than 50 percent which wiped out roughly $1.5 billion in capital.
— SAC Capital (United States) – Hedge fund which manages $14 billion loses 1 percent net of fees in July. It is still up 14 percent net of fees since January.
— Caxton Associates (United States) – The fund managed by industry veteran Bruce Kovner takes the unusual step of sending a letter to clients to assure them that market rumors about out-sized losses were false. The flagship Caxton Global fund is down about 3 percent in July but remains in the black for the year.